Gazprom accused Ukraine of blackmail on Wednesday, showing reporters a letter from Naftogaz Ukraine that appeared to threaten to confiscate Russian transit gas if there was no deal. Gazprom insists it has a valid transit agreement with Ukraine until the end of 2010. "Such a formulation is absolutely incorrect from both an economic and legal point of view," Prime Minister Vladimir Putin said of Naftogaz's letter in comments broadcast on state TV. Ukraine would face "serious consequences" if it interfered with transit flows, he added. Gazprom said Naftogaz had been trying to hike the amount Russia pays it to transit gas through Ukraine.

Gazprom said Ukraine owed it more than $2bn in unpaid bills for 2008, a figure that includes fines for late payment. It said a Russian-Ukrainian intermediary company has received $1.5bn from Ukraine but said the money had not yet reached its own accounts or been paid in full.

Is this going to be the annual New Year's gift to Ukraine?

A $10-12 million transaction for Moscow to purchase Israeli spy drones for the Russian army is in negotiation with Israel's Aerospace Industries. The Russian Kommersant reported Tuesday, Dec. 16 that Gen. Vladimir Popovkin, head of Russia's armed forces, visited Israel in November for talks on the purchase of a first batch of the unmanned reconnaissance drones which Georgia used successfully in its conflict with Russia last August.

(Oil reserves underneath the Caspian Sea & Baku-Tbilisi-Ceyhan (BTC) pipeline)